re's your gift? uh... whew. [ male announcer ] break from the holiday stress. ship fedex express december 22nd for christmas delivery. i like to say there's always a bull market somewhere. i promise to try to find it just for you here on "mad money." i'm jim cramer and i will see you tomorrow. good evening, everyone. i'm larry kudlow. this is "the kudlow report." the talks are back on. team obama and team boehner are back at the negotiating table. but there is still substantial disagreement on tax rates, tax revenues, domestic spending and entitlement reform and the clock is ticking. speaking of tax hikes, europe's grand experiment with taxing the rich more is falling apart, especially in france and

britain. and here at home, california and new york are passing through the 50% tax rate barrier. is anybody looking at how tax hikes fail the test of economic growth? back here in the u.s., could it be michigan which used to call itself the worker's paradise union state is now moving towards new anti-union right-to-work legislation and it looks like it's going to pass? but first up, budget talks resume between speaker john boehner and president obama today. with just 25 days to go, let's keep tabs on where we stand. reports of a conservative backlash against speaker boehner simply not true. he has the solid support of his leadership and the rank and file. but there is concern among some in the gop that they are at risk of becoming the party for rich people while president obama and democrats stake their claim on the middle class. and my tax rate flexibility with higher -- here's what the

president said earlier today. >> i'm not going to sign any package that somehow prevent prevents the top rate from going up for folks at the top 2%. but i do remain optimistic that we can get something done that is good for families like this one and that is good for the american economy. >> we look back republican senator rand paul from the state of kentucky. senator paul, welcome, as always. i want to ask you about the fiscal cliff, the state of play. there's revenues on the table. there's tax rate increases on the table. i don't know if there's spending on the table. what's your thinking prigt now? >> that it's a really, really bad idea to raise taxes. if you want your economy to grow, you should do the opposite. we have to cut taxes. that's how i'd fix the economy. leave more money in the private sector. the president is adamant about

raising taxes and he's dead wrong. >> there are some people saying we need a deal to avoid a huge tax increase but year end that would throw us into recession. just a thought, would you compromise in terms of let's say a smaller tax rate increase -- let's say the top rate goes to 37% instead of 40%, maybe the threshold goads es to $500,000 $750,000 rather than $250,000? does that interest you? >> no. but what about means testing for entitlement. why don't we say the rich get less social security and they pay more for their medicare? it meets the president's animus that we must get more money out of the rich. let's just send less money to the rich. i'm also willing to compromise on military spending. the only thing i'm not willing to compromise is to throw out facts, throw out common sense and say, oh, let's take more money out of the private sector

and maybe the economy will do better. it is a really, really bad idea to raise taxes. i think he'll perhaps send us into another recession. >> you may be right, as a reagan supply sider, my heart and head are with you on this. but it doesn't seem you can get a deal that would avoid a big tax hike unless you get whatever cuts you can get plus a revenue increase. what do you think of mr. boehner's idea, cap deductions and get $800 million in revenues? does that make any sense. >> that's a tax increase. it's a bad idea. but i have yet another thought how we could fix this. why don't we let the democrats pass whatever they want. if they are the party of higher taxes, all the republicans in the house vote present and let the democrats raise taxes as high as they want to raise them. let democrats in the senate raise taxes. let the president sign it and

then they can own a tax increase. and when the economy stalls, when the economy sputers, when people lose their jobs, they know which party to blame, the party of high taxes. let's don't be the party of just almost as high taxes. >> some people have called that the doomsday scenario. others have said it's a strategic retreat on the republicans' behalf. would you vote present for that in the senate if it comes up? >> i don't think we have to in the senate. i'm happy not to filibuster it and i will announce tonight on your show that i will work with harry reid to let him pass his big old tax hike with a simple majority if that's what harry reid wants because then they will be the party of high taxes and they can own it. >> i want to ask you one quickie. your friend and mine, senator jim demint, resigning from the senate. going to take over as head of

the heritage foundation. he is a great free market defender of capitalism. what do you make of jim demint leaveliing the senate? >> i think there's two ways to look t a it. the way i look at it, i've jokingly said he's going to a better place. but i really am serious about that in the sense that it's a promotion. he's going to a big microphone. we will be a national spokesman for free markets, for libertarian conservative principles, for the constitution, heritage has a great 30, 40-year history of being on the right side of these issues. i think jim demint will be a great spokesman for them. >> he said that conservatism has to spread more publicly and that's one reason he's going. he wasn't happy with the 2012 elections. do you think conservatism just didn't make the case in the elections last november? >> we always have to do a better job at how we speak about liberty, the constitution and how inclusive it is and how it offers things to people who have

not yet experienced the fruits of liberty. so i think we can always do a better job. what i will say about jim demint is he has started and brought some liberty-minded libertarian/conservatives to the senate. we have a pretty good caucus now. there's a real strong jim demint influence in our caucus. >> great stuff. senator rand paul, kentucky, thank you sir. all the best. >> thank you. so besides praising jim demint, senator rand paul said something very interesting. he said he will not vote for a filibuster. he said, let larry reid, no filibust filibuster, 51 vote, simple majority and then he will vote no and let the democrats have the onus of the big tax hike. quite interesting. now here's a political threat. is the republicans at risk of becoming the party of the rich while president obama and the democrats stake the claim as the party of the middle class? let's talk. we have cnbc contributor howard

dean, former vermont governor and democratic presidential candidate. and we welcome back katie paveli pavelich, author and news editor for townhall.com. listen to this poll from the latest cnbc all american survey. listen to this. americans are split over who is more to blame, 21% blame obama and the democrats. 23% blame the gop. and 52% blame both sides equally. now, i think that 52% is because howard dean wants to tax everyone. howard, defend your position. you may be single handedly bailing out the republican party by wanting to tax the middle class and everybody else. >> i'm just telling the truth, larry. i think senator paul is a fine person but his economic theory is whack job stuff. the idea -- we've already had big tax cuts. that's why we have the deficit we have. the truth is, if you want to

balance the budget, which i do, you have to have increased revenues and you have significant spending cuts. and you have said many times on this program that raising taxes on rich people is not enough to deal with the deficit. you are right. the truth is, the best thing we could do is go over the fiscal cliff. we have the same tax rates that we have when bill clinton was president. significant cuts in defense and also significant human services can you tell us. >> katie, let me ask you, before you respond to what governor dean is saying. there is logic to what howard dean is saying. i don't happen to agree with it. but i know where he's coming from. katie, let me ask you this -- katie can't hear me. we'll wait for her to get back hooked in. howard, what about the notion that i'm posing tonight -- i've said this a few times -- republicans better be careful. they're not going down your road and the democrats aren't going down your road. you have middle class tax cuts for the democrats and it sometimes sounds to me as an old

reagan conservative that the republicans better watch themselves because sometimes it sounds like they are kind of defending rich people. that's their whole mantra, just defending rich people. and i think that's not where they should be. >> i would agree. if i were politically advising the republicans, which i'm certainly not, i think tom colts was right from oklahoma. they ought to get out of the way. there wouldn't be as much deficit reduction, which is what i care about. if they were smart politically, they would get out of the way and let the top 2% pay what they paid when bill clinton was president. the problem is, it's not going to do a lot to solve the deficit. i think the problem here is not politics. the problem is the deficit. i know i've gotten a lot of hate mail from both the right and the left -- >> no, you're being honest. >> the fact of the matter is, we have to balance the budget. we've been in an economic recovery for three years. we're not where we ought to be. the longer you put this big deficit on, the harder it's

going to be later on. >> katie, i'm sorry but lost you for a minute. i'm worried, katie, because the gop is in an unenviable political position after the election, because they're not talking about enough spending and entitlement cuts, what you hear is defending tax cuts for the rich. in other words, the gop is becoming the party of rich people and that's not where they ought to be. >> the problem is marketing. and republicans have had a big problem with marketing since the ronald reagan days. they need to get on the ground and talk about how these tax cuts affecting the rich will affect the middle class. democrats have been getting away with saying that the rich are the ones who need to pay more when they never mention the fact that the rich people are the ones employing the middle class and therefore they'll be affected whether the rich get a tax cut or not. >> that's a key point. do you think the republicans are emphasizing growth enough, just the way you said it -- >> no. >> there's a lot of supply side

stuff. we need after-tax conservatives, we need better rewards. but well-to-do people are the ones that builds the factories and employ people. has that growth message been employed itself enough? sometimes it sounds like obama is for the middle class and the gop is just there for rich people. >> obama is for the middle class and he's for keeping people in the middle class. and the republicans would do themselves a service to show how the republicans and their plan, specifically on the fiscal cliff will allow people to move from the middle class into the upper class and allow even more people after that to move out of middle class and into the upper class. growth would be a great thing both on a personal level and an economic level as well. >> last one, senator rand paul is not going to filibuster in the senate. he's going to let the thing go through, he's going to vote against it. do you think republicans in the house, katie, should vote present and let the democratic bill go through? >> i'm all for the republicans voting present.

mr. dean just last night said having us go over the fiscal cliff actually wouldn't be the worst of ideas. if that's how we're going to go and president obama has said that he's not going to sign anything without the tax increase, fine, let them own it. have republicans take a step back and give president obama what he wants. >> i've got to get out. thanks to both of you. >> thank you. >> howard dean, we preeshtd it. and katie pavelich, we appreciate it. egypt's government deployed tanks around the presidential palace today after clashes with protesters killed seven people. in syria, meanwhile, rebels continue to advance on damascus, prompting concern that president assad's regime will respond with chemical weapons. question, should the u.s. intervene in any of these here now is mark ginsburg, former white house middle east advisor. welcome back, mark. here's the thing. we drew a red line, president obama drew a red line over these

chemical weapons of mass destruction. at what point do we have to start bombing them to prevent them from moving and utilizes those weapons of mass destruction? when's that happen? >> larry, the fact of the matter is that i already know some of those weapons have been moved and put into the hands of the iranian revolutionary guards operating in syria and also i believe some of it has been sold to hezbollah. so as far as i'm concerned, there's some of that red line that's been crossed. but to answer your question, the fact remains is that if the intelligence report says, as the president and the press reports are leading us to believe, that precursors have been loaded into those shells, somehow or another we're going to have to incinerate from the air those weapons deposed quickly before assad goes down like adolf hitler in a bunker where in the end he tries to take the whole country with him. >> no one's advocating

intervention in egypt. but it just seems to me that morsi is turning out to be a radical. he wants sharia law to replace the secular state. he is not in favor of personal freedoms. he is not going to have a constitution that favors the kind of freedoms we thought they were going to go for. morsi's going to be a bad guy, is he not, marc? we'll have to contend with somebody -- >> larry, are you surprised? are you shocked? should anyone be shocked that the muslim brotherhood is after almost 60 years of waiting in the wings trying to finally seize power, trying to use the leverage of power, has bought off the army by candy-coating constitutional provisions to create a military state within a state? i'm not surprised at all. >> if he loses the referendum -- he's got a referendum. he says he's going to allow the referendum on december 15th. if he loses that referendum which ain't all that great for the constitution, but if he loses it, do you think he'll overturn it and just hold on to power as a dictator?

>> i don't think in the end he's going to lose it because in the end, the muslim brotherhood has the ground game and control in egypt. but let's assume that he loses it. the fact is they'll come up with yet another ploy to overthrow that decision until they ultimately get the constitution they want that imposes sharia law in the country and consistent with what the muslim brotherhood has tried to do since 1928 in egypt. >> there you have it. many thanks, ambassador marc ginsburg. appreciate the update. a major green light from the energy department for oil and gas. believe it or not, it calls for more drilling here, more exports of our own resources, drill, drill, drill. we will have the details next up. and don't forget, free market capitalism is the best path to prosperity. just look at the energy industry, what is happening there, if government would just take its paws off it.

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sponsored report gave a full endorsement that more liquid natural gas exports will help our economy and more shale oil and gas production will make us energy independent. question, will the epa keep its

snout out of this great breakthrough energy process? here now to tell us is john hoffmeister. john, what's this take on the liquefied natural gas? i didn't even know there were constraints on their exports. >> well, the department of energy has to grant permits to economies that would seek to export natural gas. the study that came out was not an endorsement by the department energy, not yet. it was a third-party report analyzing the situation. it will now go into public discussion. the department of energy hasn't really taken a position yet opt report. but here's the reality. this is buried treasure, larry, this is buried treasure in this country, natural gas, i mean, that could be the stimulus that this economy has been looking for for a decade. >> 100% right. >> if we could develop this natural gas for transportation fuel, for power production, for all of the commercial and industrial uses --

>> the whole nine yards. >> yes, we could build such a transportation infrastructure without imported oil. that's the key thing. we eliminate imported oil. >> and another government study basically makes that case again saying we could be energy independent. but the question is, will they le will the epa keep its snout out of the whole shale miracle and will they open up federal lands? we can knock off saudi arabia. we won't need it. the middle east becomes less of a problem. what's your take as somebody who's still in the industry, john? do you think the epa will let them do it? >> it's not just the epa. it's the democrats in the senate and the house that are part of the problem. we already have democratic senators writing to president obama saying, please don't produce as much as lng as we could. my confidence level is very low

that the epa will not use the clean water and the clean air act to take over the supervision of the states which is doing a very good job for the american economy and the american people. but because they are incentivized by an anti-hydrocarbon leadership on the part of the democratic authorities in washington, they will take advantage p take over the states' jurisdiction by setting standards that are beyond what we know today that are not necessary because we know what we know today. and let's be clear. the industry is doing everything it knows how to do to continually make fracking and continually make the whole process, including capturing methane, better for everybody. >> it's an economic miracle if they would just let it happen. it's an economic miracle. many thanks to john. we appreciate it. now, have you all noticed the u.s. and global stock markets are actually rising, in many cases to multi-year highs?

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german dax up 25%. the french cac up 11%. thailand up 43%. japan up 6%. year to date, the usa is up over 12%. that ain't bad. let's bring in our pal, jim iuor iuorio. you know, jim, it's turning out to be a very good year and it's turning out to be a very good year on a global basis. >> no doubt about it. but let's break it down. japan's stock market has rallied huge because of promise of liquidity injections and doveishness. the same thing can be said for europe and for the u.s. around the globe, everyone's squeezing interest rates and forcing money to seek yield wherever it can. it could have followthrough in japan. europe has run kind of far -- the market has chosen to believe that europe's problems are somewhat behind us. i don't really share that philosophy. but i think this move is

interesting. >> but the european financial risk fear indicators look great. in fact, these financial indicators look great worldwide. i agree with you trat central banks are greasing the wheels. but in a very gloomy world, a very gloomy psychology where the worst case becomes the most talked-about case, at some point don't the markets send an impressive message -- and again, they are kind of moving together and the direction is higher, jim iuorio. what does that tell you sfl? >> it tells me things are better than they were. the european crisis isn't done but it's certainly not at the same level it was two years ago. they took some major steps in fixing things. i'm saying they haven't fixed it yet. i always like to be a little bit cautious. but like i said, i would be interested in buying japan. i am mildly negative short term on u.s. but i don't think there's enough -- they're so underinvested that i don't think any downward move would have big

legs. >> and gold has lost a lot of its luster, people shifting in the stocks. the nikkei in japan is up 12.9% year to date. >> but look at the currency. >> the currency should depreciate. it's the best thing in the world for japan and for their economic growth. that may be a little hidden gem out there. all i'll say is with a lot of talk about fiscal cliff, including this program, bald it could be a problem, the stock markets are dissonant. they're dissonant in the chinese soft/hard landing and putting it into a soft landing. something good is going on out there. and we better keep a good eye on it. i'm sorry we don't have more time. >> i think there's plenty of good things. >> folks, you're not going to believe this, you're not going to believe this, the michigan statehouse has just passed a bill in favor of making that so-called union paradise a right-to-work state. yes, it's really true.

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welcome back to "the kudlow report." in this half hour, michigan is really doing it. the statehouse just passed a bill to make that union stronghold a right-to-work state. we are about to talk to governor rick snider object it. . and has a recession already started? believe it or not, that's the forecast of lakshman achuthan. he says it started in july. we're going to press him on all that. now, a movement started by american majority action called fire boehner has been trending on twitter. . but there's really not one wit of serious evidence that mr. boehner has any problems holding on to his speakership or even conservative leaders in the house. here now to try to make this weak case is ron meyer. ron, first of all, i want to say that i commend john boehner for his valiant attempts to stop the

fiscal cliff and to make a deal without giving up growth principles. but when you say conservatives don't support boehner, what is eric cantor, what is paul ryan? what is jeb henesling if he's not a conservative? what is tom price if he's not a conservative? what exactly are you smoking? the top conservatives in the house support boehner. >> well, i actually don't think that somebody like tom price would if he has his choice of who he could pick out of everyone. we should have the power of self-determination. we shouldn't get seniority decide, this person should be the next person -- >> look. he is running the house. he's the speaker of the house. you confuse that with running the conservative movement. >> well, then why don't you come out and say, we shouldn't raise taxes. boehner came out and said we should raise taxes. >> i think boehner is doing the best he can to prevent marginal

tax rates from rising. i think that's a very noble cause after conservatives and republicans lost in the last election. i think boehner's done the exact right thing. >> i've heard you make the bold case for conservatism on this show. we should advocate for what worked with ronald reagan. guess what? our economy took off. we got 20 million jobs and youth unemployment dropped 43%. and revenues doubled. >> that's not the issue. >> yes, it is. >> that's not john boehner's issue. john boehner didn't lose the presidency, my friend. and don't forget that. and by the way, conservatives did not win the presidency and conservatives did not win the senate. it was a lousy year. and you have to deal with that. and let me add one thing. i am a flat tax supply sider and i worked for ronald reagan. reagan compromised. he compromised in 1982 over a lousy deal which he regretted.

he compromised in 1983 over a very good social security fix. and then he compromised again in 1986 over a very good tax reform fix. >> right. >> so if you blame -- >> i agree if the other side wanted to compromise, i would say we should. >> you've got to learn how to work a little bit here. >> what does obama want that's not in the fiscal cliff -- he wants what's in the fiscal cliff. it's defense cuts and tax hikes. we're compromising with someone who doesn't want to compromise. he likes that stuff. i know he doesn't want to raise taxes on the middle class. but we have to give up everything in this deal. we should articulate our principles or give him what he wants. we're going to vote present and say -- >> boehner's doing the best he can. he's playing a short deck right now. >> you really think he's the best spokesman for conservatism. >> no, no. >> we should put a paul ryan -- we need younger leadership. >> paul ryan came out publicly in support of boehner. that's point number one.

secondly, boehner jumped ryan over more senior people to put him as head of the budget committee. that's my second point. and boehner himself is being advised by ryan every step of the way. >> what do you say about this purge then? he's purging people that wants to balance the budget. >> you lost, ron. don't blame boehner. blame the republican party. blame conservatives. jim demint said it today. the conservative message has got to get out more publicly and that's why he's going to the heritage foundation. >> that's right. >> many thanks to ron meyer who does not understand the difference between conservative and the speaker of the house. now, the shocker of the night, the michigan statehouse just passed a vote to right-to-work bill. that's right, a vote to pass a right-to-work bill. that in michigan, after protesters swarmed the state capitol today and police had to respond with pepper spray.

a short time ago, i spoke with michigan republican governor rick snider and i began by asking if his right to work was, in fact, coming to his state? here's what he told me. >> this morning, i called for the legislation to move forward. i would like it on my desk so i can sign it. it's very much about being pro-worker. it's time to give workers the choice of joining a union or not. i encourage the unions to step forward and show that value proposition to workers. it's very much about being pro-worker. it's not anti-union. it gives an opportunity for better economic development. we need more and better jobs in michigan. and when i looked at indiana, they've shown strong results since they passed it in february. a number of companies are coming there, adding lots of jobs. we need more and better jobs in michigan. it's about worker choice and economic development. >> let me just make sure we understand this, the viewers understand this. this is for -- i'm going to call it paycheck protection, if that's fair enough. this is to protect it has paychecks of non-union workers

who were working on union sites, is that true, sir? >> well, the way i view this, this is really giving workers a choice to say, are they getting what they need from the union and decide to join or not. i believe most of us believe you shouldn't be forced to affiliate with an organization. in many respects this is a chance for unions to really show the value they add and people can see that value and feel free to join a union when appropriate. >> it doesn't end collective bargaining and it doesn't end unionism in michigan, is that fair? >> that's absolutely fair. it does nothing to the collective bargaining relationship. i believe in collective bargaining. i've done it twice successfully with state employees. that's going to continue because that's between an employer and the union. this issue is between the workers and the union and it's time to be more pro-worker. >> and basically -- i don't know why the unions oppose this. why shouldn't workers have freedom? >> i tend to agree with you because if you look at it -- unions did many great things in our country in the last century, particularly in michigan, about

working conditions. and people wanted to join a union because they saw value. shouldn't we have that same equation continue today? let's give workers the choice and if they see value and that value has been presented, they'll join. if not, there's an issue that should be addressed. >> governor, you were talking earlier, this will help michigan attract jobs. have you lost jobs to wisconsin, let's say, or indiana or ohio which actually have tougher right-to-work laws? >> well, indiana's the key case. in february they put through right-to-work laws and they've mentioned there are 90 different companies that have looked at indiana since then and cited this as one of the factors that would account for thousands of jobs. michigan lost 750,000 jobs in the last decade. the last two years, we've added 148,000 jobs back. we're forecasted to add more. but let's keep going. we're the comeback state in the nation. but i want to see that pace even pick up faster. >> right-to-work coming to the state f o michigan, governor, we appreciate it very much, sir. >> great to be with you, larry.

after more than a decade after producing its popular line of mac computers in china, apple is set to bring some of its manufacturing jobs back home to the usa. is this a political move or is this a clear-cut economic manufacturing move? here to discuss is "forbes" columnist and china export gordon chang, the author of "the coming collapse of china." serious question, do you think actual's doing this for politics or economics? >> actually both. but when you look at china, though, their manufacturing days are over. americans are less produmore pr less prone to strike -- >> are you sure american works are less prone to strike? we've reported on this show a whole bunch of strikes, including the hostess twinkie companies, the ports of los angeles and out on the west coast. we have obama in the white house. the unions are going whild here.

in all seriousness, i don't think unions are any more placid here than they are in china. >> but in china, workers go out on wildcat strikes all the time. foxconn which manufactures about 97% of apple's products, they've been really subject to labor troubles, from suicides to strikes. so i think apple is starting to see that there are some really important economic reasons to manufacturing. they're not the only company doing that. >> is it robots they're going -- i was told that apple is going into a plant in the u.s. that's a robotic plant so american workers aren't really going to be hired. >> last year in foxconn, they had 10,000 robots. if you have robots, china's cost manufacturing advantage is really nil except for chinese consumers. >> as long as we keep drilling for natural gas and we have the shale revolution, that's going to make us more competitive. i'm not making a case for china. i'm just a little interested in the apple case. that's what i'm saying.

i'm a little interested in their motives, not too much but just a little bit. you trust apple? >> no. but apple of course is doing this for political reasons. >> but if it works, it works. good for the consumer. >> ge doesn't have that same political problem. >> jeff immelt told me he wanted to move out of china -- i believe ge has shifted resources out of china. >> a lot, especially appliances and low-end goods. but small and medium-sized manufacturers are sick and tired of the corruption, the slowness and all the problems that are so evident -- >> they steal your ideas, counterfeit your products. it really isn't the wonderland of free market capitalism that some people make it out to be. >> no. this is part of a broader narrative of a lot of manufacturers leaving china for vietnam, indonesia, bangladesh, mexico. this is really part of a decades-long trend. >> i have to leave it there. gordon chang, thank you very much.

be sure to catch the tim cook interview tonight on "rock center with brian williams." that's at 10:00 p.m. central. the french ought to stick with fine foods because we found out that their 75% tax rate on the rich doesn't work. the economy there is tanking, even worse, same story in britain. why would we want to copy their policies here in the usa? i'll try to get some answers in a moment. please stay with us. [ male announcer ] how do you trade? with scottrader streaming quotes, any way you want. fully customize it for your trading process -- from thought to trade, on every screen. and all in real time. which makes it just like having your own trading floor,

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heergs some breaking news. the a.p. just now reporting that the spending on the 2012 presidential election did surpass $2 billion. that, of course, is a record. i hope we got our money's worth. anyway, let us move on. across the pond, the french unemployment rate has just gone up to 10.3%. that's a big number. but the new french government promised that its tax the rich policies would help the economy. why are we in the usa imitating failure? did you know that california and new york and hawaii are also poised to hit their richest people with a greater than 50% tax rate? isn't that great?

emulate france. here now is jim pethokoukis of the american enterprise institute. jim, i thought we wanted to emulate success, not furl. >> i thought so, too. listen, the president wants to run an experiment and see how high we can crank up tax rates in this country without it hurting economic growth. they're already running it in europe, in france, in great britain. the entire european experiment here has been one of tax hike austerity. even though they focus on the spending cuts, you're talking about a high tax area raising taxes even higher. we're trying to to do the same thing here. >> least the brits have the humility to acknowledge their mistake. they took the rate from 40% 050%. millionaires left the island.

now they're coming back and dropping it to 45%. at least the brits have some humility. the french don't seem to have any. those socialists are going to go down with the ship. >> they're going to go down with the ship. when that ship goes down, there's not going to be any millionaires and billionaires left. they will have left and gone to switzerland. be great to get them over here. >> those millionaires that are fleeing france and britain, they're not going to california. >> no. >> the total combined tax rate there is now moving above 50%. they're not going to new york. combined tax rate is above 50%. and oh, yeah, they're not going to hawaii. that's where the president takes his vacations. they're not going to hawaii because those are over 50%, too. what does california, new york and hawaii know that we don't know? >> i think they do not believe -- you can say the same thing for the obama white house -- they think america's undertaxed and the tax rates can go dramatically higher despite

these examples in europe without it hurting economic growth. i think they are completely wrong. i think you can draw just the opposite conclusion of what's going on in europe. but apparently we're going down that route anyway. >> isn't that why president obama wants to raise the tax rate? he raises the tax rate in order to spend. seems to me that taxing and spending is his mantra, just like the east european mantra and the california and new york -- why would you want to raise the tax rate $1.6 trillion if youp didn didn't want to spe? that's a big number. >> it is. jared bernstein was in "the new york times" complaining about the tax cutting in this country over the past 30 years. and jared says, we've gutted the tax code, we're just not getting enough revenue for all the spending we want. >> i would gut the tax code of all its special deductions and loopholes and whatnot and take the rate down to about 15%. i am a flat tax guy. what i don't get is why the united states wants to imitate the mistakes of western europe,

jim pethokoukis. that's what i don't get. you get the last word. >> i think it's stunning and i hope we learn from yoour mistak as quickly as they did in great britain. who needs to wait for a recession? our next guest says we may already be in one and it started way back in july. think about that. recession last july. stay with us. he'll defend his position. r ] when this hotel added aflac to provide a better benefits package... oahhh! [ male announcer ] it made a big splash with the employees. [ duck yelling ] [ male announcer ] find out more at... [ duck ] aflac! [ male announcer ] ...forbusiness.com. ♪ ha ha!

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we've got some more breaking news for you.

the michigan senate just followed the statehouse and has now passed a bill to make michigan a right-to-work state. the vote was 22-10-16, if i have that right. just minutes ago on this program, governor reiick snyder said he would sign the bill. now that it's passed, looks like it's going to happen. imagine that. the union workers' paradise going right to work. residents of the los angeles area seniors complex are up in arms over the owner's order to take down the christmas tree because they're religious symbols. the company's owned the complex for four years and won't comment about the order. people who live there a while say this has never happened before. we say, drop the ban and light up that tree and the minoras. let there be no secular tyranny. by the way, they are christmas trees. don't forget that.

for a moment, forget about the fiscal cliff. the u.s. is already in a recession and has been since july, according to my next guest. here now with details on this recession call is lakshman achuthan, the distinguished co-founder and chief operating officer of the economic cycle research institute. lakshman, we've been talking about how world stock markets are rallying. but you're saying, watch out, because we've already entered a recession. >> we know the market is not the economy. the economy -- well, you knew jeffrey moore. >> i did very well. >> you knew the indicators that are used to define recession. they're not cherry-picked. that are very specific. they've been defining them for decades, almost a century. >> what are they? >> they are production, income, sales, broad sales and employment. that is it. and when they peak collectively, that is a telltale sign that you have turned the corner on the business cycle and are headed down.

>> what about the -- production has come down. i agree with you. income has come down. sales have come down. employment, however, is still rising. >> well, first off, on production and income, you have not seen the simultaneous decline we have now in over half a century. you've never seen it outside of a recession. and you've always seen it inside of a recession and both of those peaked in july, broad sales thus far the peak is in july. that's the high point. we'll see what happens. unemployment is still rising. that's your best argument -- >> employment is still rising. >> jobs growth is still positive. now, that is not inconsistent with a recession. in three out of the last seven recessions -- >> it happens. >> it has happened. we had a weird one in the '70s, jobs growth went on for eight months after the recession began. >> can be a lagging indicator. you have some obvious things to think about here. gdp is still rising and the federal reserve is super easy and we may have a humongous tax

hike. that plays into your scenario. but you're saying -- >> makes a bad situation worse. >> what about the fed easing for example and the fact that gdp is still rising? >> let me take gdp first. a lot of people don't know that it's very common for the first quarter, the quarter that a recession begins, to be positive. on average, it's about 2%. and after the recession begins, you get massive revisions to gdp. in the last couple of recessions, the quarterly revisions on gdp after they began were between 2% and 4%. that's huge revisions and then you have stocks up. >> stocks are up. fed has made interest rates rock bottom. and the fed has -- >> actually i would -- >> have you ever had a recession, seriously, with the federal reserve so easy and with financial conditions so easy and with the money supply so rapid? this is a serious question. >> it's a good question. >> you may be right.

>> you've never seen the kind of attempt to pump money into the economy that you're seeing now both by the fed, led by the fed and worldwide. that's the result. those four indicators are the result. >> it hasn't worked. the use of money, the turnover of the money is all going negative. >> we've seen in 20% of the last 15 recessions, stock market went on through the recession. >> i have to get out. i hope your wrong. but i appreciate your acumen. many thanks to lakshman achuthan. thanks for watching, everybody. stocks say good times are coming. lakshman says beware of a recession. americans believe they should be in charge of their own future.

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